Investment, Saving, and Taxation in an Open Economy

Michael Devereux

Oxford Review of Economic Policy, 1996, vol. 12, issue 2, 90-108

Abstract: This paper surveys the literature on the relationship between domestic saving, domestic investment and international capital flows in an open economy. It addresses two related issues which appear to conflict with the standard open economy paradigm the high correlation of domestic saving and investment, first noted by Fildstein and Horioka (1980), and the claim, made by Feldstein (1994), that 1(British pound) of outward foreign direct investment reduces domestic investment by approximately 1 (British Pound). The interpretation of these empirical results is discussed, primarily with reference to the probable impact of alternative government policies aimed at stimulating the level of domestic investment. Copyright 1996 by Oxford University Press.

Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:oup:oxford:v:12:y:1996:i:2:p:90-108

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